Forecasting for Growth
Small business growth has been a rather fickle thing for the past couple of years. Our economy and society have seen a lot of change, and businesses have had to react to those changes rather than plan and forecast proactively.
Even with a somewhat volatile market, it is possible to forecast for growth. This involves knowing your numbers and developing a growth strategy with trusted experts who understand your unique business and industry.
There’s a lot that goes into forecasting for growth, but there are foundational parts of the process that apply to nearly every business.
Analyze Your Historical Numbers
It’s always a good idea to start with gathering and analyzing your historicals; after all, if you don’t know where your business has been, how can you strategize for where you want to be?
If you are just starting out, gather the data that you have. Even just a few months’ worth will allow you to spot trends, identify your profitable products or services, and get an idea of what you can do to grow your business.
If you have more historical data to pull from, 18-24 months’ worth of numbers is ideal. This will not only give you a firm idea of client trends and any seasonal ups and downs but will also allow you to pinpoint any outliers that you might otherwise be tempted to strategize from.
2020 brought a lot of unanticipated change that impacted all businesses. Some saw unprecedented growth while others were forced to shut down – and some were forced to pivot altogether. If you can see your numbers from both before and after the pandemic, you will be equipped to put everything in perspective and use those numbers to create your growth plan.
Numbers to Review
Each business will have different reports to pay attention to, but every business owner should review their Profit & Loss (P&L) statement. Your bookkeeper can (and should) pull this report for you monthly.
Other reports, however, will depend on your unique business.
Law offices, for example, will need to know revenue per employee. Knowing how much revenue each attorney and paralegal brings in, on average, will equip you to more accurately plan and forecast for future growth.
Both product and service-based businesses will find it beneficial to know the average sale per customer.
These reports will allow you to understand both the profitability of your services and products and the ROI of each of your employees; in turn, this data equips you to create an actionable growth plan.
There are other reports that you will want to review as well, depending on your industry and goals. A great Financial Coach can help you understand which reports you need – and how to use them to reach your goals!
Creating a Solid Plan
Your numbers are vital to your growth plan, but they’re not the only thing to consider. Developing a strategy for sustainable growth requires the advice and guidance of professionals who understand not only your numbers, but your industry, services or products, and goals.
Your bookkeeper and CPA will be helpful in pulling the right reports and helping you stay on top of your numbers, but in order to develop an actionable and effective plan, you will want to work with either a CFO or a strong Financial Coach.
For many small business owners, a CFO is not a realistic expense; a Financial Coach, however, is an investment that should be strongly considered. A great coach is committed to guide you through the process of not only understanding your numbers but working with you to strategize a plan that fits your business and goals.
If you are looking for a coaching firm to help you bring your business to the next level, we would love to talk with you! Our coaching program is multi-faceted, offering you access to top business coaches in a number of specialty areas including Strategy, Financial, Marketing, Culture and Management, and more.
We are committed to helping you develop a strong strategy and action plan, forecast for growth, and build the business that will allow you to thrive!